Don’t Lose Control of the Money. Check Yourself (or have someone do it for you)
I often heard in business school and in the hedge fund world (pre start up life) “the CFO really runs the company.” I now can get it. You need a visionary and the passion and almost politician-like assets of a CEO for sure, but you also need someone to check them (and their wild ideas :)) regularly.
What do I mean by check them? Mainly keep a close eye on the money and adapt strategy in real time to ensure the business is getting the most return out of every dollar. I suggest looking at your bank accounts in conjunction with your accounts payable every day as part of your routine (if not, definitely weekly). Then compare it to your revenues and analyze what’s working or not. DO NOT just give your books to an accountant. They will simply keep them for you and let you know when you don’t have enough money to pay the bills (hmmm ok that’s WAY too late). You need to be dedicated to thinking about the money and redirecting as needed (or hire someone to direct financial strategy and analyze ROI).
I have witnessed or personally acted in deliberately naive ways in this regard – if you don’t look, it’s not real! Ha! Or ‘someone else is dealing with it’ but they really aren’t. Or ‘I am well-funded’ until ‘I’m out of cash’. Oh you completed a multi-million dollar financing? – cool, now you should be even more nervous about burning that shit away – because guess what at the end of the year your investors are going to want to know what you did with their money and how effective you made it. Don’t be nilly willy with it. Or else you ain’t getting more. Leave your ego out of it. Cash is King and you can’t let things get out of control (because it can happen in the blink of an eye if you aren’t paying close attention).
If you don’t understand back office financials, get an outsourced CFO (hi!) to do it for you. Regularly meet with them (weekly) and discuss where the money is, where it’s supposed to be next month, in the next 6 months, and stress test the model continuously (aka assume you have no revenues for the next 6 months vs how much money is in the bank today? Can you pay your bills with nothing coming in?). Just as important, analyze the money you have spent vs what it’s done for you – mainly, as a numbers person I want to see revenue generation, but it could also be value that’s deemed intangible. I understand that sometimes there isn’t a return you can ‘see’ on every dollar, sometimes you ‘feel’ it. But, you should be cognizant of that, try to make more of the dollars ‘see-able’, and just some of the budget ‘feel-able’. Routinely question and plan for budget – annually first, then week by week, month by month, and quarter by quarter as you go. Change plans as needed based on what’s working and what’s not. Budget vs Actual. Live by it.
Kind of short and sweet today. It’s not rocket science, just do it. Keep regular, sharp eye on the money, when it may run out, and where the best use of each dollar is going. Track and Adapt.
